As the three-month exclusive negotiating window with Fox began July 1, The Hollywood Reporter reports on the UFC seeking a huge rights fee deal as its current agreement with Fox is nearing its end. The article notes that WME-IMG will seek to “dramatically increase” the fees to justify its $4 billion purchase made last year.

The article touches on the point that the UFC is an attractive sports property due to its reach to a youthful, male demographic but also reflects caution with some potential sponsors.

Reaching that millennial male demographic is one reason UFC has begun to overcome its stigma among media buyers long wary of MMA’s bare knuckle (and sometimes bloody) violence, though not completely. Budweiser and Harley Davidson are UFC sponsors, but the franchise still does not have an automotive sponsor. Ford, which advertises across the Fox Sports portfolio, won’t place ads in UFC programming.

Last year was a good year for the UFC on FS1 based on television ratings as UFC Fight Night averaged near 1 million viewers and the prelims, boosted by 3 PPVs over 1 million buys, also drew over 1.1 million viewers prior to the events.

The article notes that the PPV business, which has dragged this year, will be a sticking point in negotiations. Since the biggest fights and fighters will be on PPV, a TV deal will not air the likes of Conor McGregor on its network. Yet, the UFC’s business model is predicated on PPV as its biggest revenue driver despite the fact that it has built out its over the top platform, UFC Fight Pass and FS1 airs a bulk of UFC content.

The UFC’s last two PPVs failed to eclipse 170,000 PPV buys (UFC 212 and UFC 213). While UFC 211 was a bigger event, there has not been a PPV which has been close to over 300,000 PPV buys. Next Saturday’s UFC 214 in Anaheim might be the exception with the return of Jon Jones-Daniel Cormier. The first meeting at UFC 182 rekindled the UFC PPV due to a strong marketing push and that event drew 800,000 solely pushing that fight.

Late last year, the Sports Business Journal indicated that the company was looking for $450 million per year for 10 years. Currently, the deal is 7 years for $115 million. Based on the current state of the company (i.e., ratings, events, star power) it will be interesting if that is still what the new owners are looking for.

Payout Perspective:

UFC 214 might be a big PPV in terms of business and the negotiations for a new media rights deal with Fox. In the coming months, we should hear rumors and rumblings of how negotiations will go. As a sports property, the UFC is still attractive and for FS1, without the UFC, there will be a major whole in its programming. NASCAR ratings have been disappointing this year and without the UFC, the network would have to look to other sports/sports properties to fill its void. It will be interesting to see if the company re-ups prior to the end of the exclusive negotiating period or tries to see if there are other bidders out there.

FOX is probably going to be extending their contract and it will likely be around 3x what the original deal was. This company is going to get to the point soon where they are literally grossing close to 1b per year.